The International Swaps and Derivatives Association, Inc. (ISDA) today announced the launch of the 2008 Fannie Mae and Freddie Mac CDS Protocol.
The purpose of the Protocol is to offer market participants an efficient way to settle credit derivative transactions referencing Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), the two US government sponsored entities (GSEs) that were placed in conservatorship on Sunday, September 7.
"ISDA’s protocol mechanism is playing an important role in ensuring stability in the credit derivatives industry by helping to provide participants with an efficient and reliable settlement process in the event of a reference entity default," said Robert Pickel, executive director and chief executive officer, ISDA. "The success of these efforts reflects the industry’s ability and determination to continue to strengthen the infrastructure for privately negotiated derivatives."
The Protocol, which is open until October 2, offers institutions the ability to amend their documentation for various credit derivatives transactions in order to utilize an auction scheduled for October 6, 2008 to determine the final price for certain Fannie Mae and Freddie Mac obligations. Markit and Creditex will administer the auction.
The 2008 Fannie Mae and Freddie Mac CDS Protocol is open to ISDA members and non-members alike.
A complete list of deliverable obligations that are included in the Protocol and a list of adherents to date are available at http://www.isda.org/. The text of the Protocol and form of adherence letter, guidance on the mechanics of the Protocol, and answers to frequently asked questions are also available on the Association’s website. Details on the auction are included in the Protocol.
ISDA also announced key dates for other Protocols. The adherence period for the Tembec Protocol ended on September 26 and the auction date is scheduled for October 2. The adherence period for the Lehman Brothers Holdings Protocol will open on October 6 and run until October 8. A first list of deliverable obligations for the Lehman Brothers Holdings Protocol is available on the ISDA website, the deadline for submitting additional obligations is Wednesday, October 1. The auction date is scheduled for October 10. A protocol for Washington Mutual is tentatively scheduled to open on October 14 and run until October 17, with a tentative auction date of October 23.
